Japanese lender folds as financial distress mounts
By TOMOKO A. HOSAKA
Associated Press Writer
TOKYO (AP) - SFCG Co., a major provider of high-interest loans to small businesses, filed for bankruptcy protection Monday – the latest Japanese company to fold under the growing weight of recession and financial distress.
The Tokyo-based moneylender, which borrowed from several foreign banks including Citigroup Inc. and the former Lehman Brothers Inc., listed 338 billion yen ($3.6 billion) in liabilities in its filing with the Tokyo District Court.
It said it could no longer stay afloat amid mounting bad loans,tighter credit conditions and new regulations limiting interest rates in the consumer lending industry.
“Unfortunately, we are at a point where we can no longer turn
the situation around on our own,” the company said in a statement. “We hope to become solvent again as soon as possible under civil rehabilitation proceedings.”
The news underscored that more corporate bankruptcies may follow amid Japan’s deepening recession. Major bankruptcies last year came mainly from real estate and construction companies, but SFCG’s failure signals that more sectors could be at risk in the months ahead.
SFCG is the biggest Japanese company to fail this year and becomes the 10th listed company to file for bankruptcy since Jan. 1, according to corporate credit research firm Teikoku Databank.
Last year, 34 listed firms failed – the most since the end of World War II, Teikoku Databank said.
Financial shares came under heavy selling pressure Monday on the news, though it “didn’t affect the overall market too much because it’s something investors had been expecting,” said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
Shares of SFCG’s major Japanese creditors, including Orix Corp., and other consumer lenders were hammered.
Orix shed 13.5 percent to 2,060 yen, and Takefuji Corp., Japan’s biggest consumer finance company, plunged 15.9 percent to 393 yen. Shinsei Bank, which declined 7.6 percent to 85 yen, said it did not have any direct exposure to SFCG.
The Tokyo Stock Exchange said it will delist SFCG from its “First Section” of biggest companies on March 24.
The issue tumbled 15.5 percent to 1,092 on a deluge of sell orders. It has plunged 86 percent since Lehman Brothers filed for Chapter 11 last September.
Established in 1978, SFCG posted 15.9 billion yen net loss in the August-October quarter, down from a 3.6 billion profit the previous year.
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